Looking to make his first direct investment in India, the legendary investor Warren Buffet is in negotiations to invest around Rs 2,000- 2,500 crore in Paytm parent One97 Communications.
Buffet’s Berkshire Hathaway investment talks were reported by two people who are familiar with the development.
Negotiations are expected to be completed in the upcoming weeks at over $10 billion valuation of Paytm which operates in mobile payments and online financial services. The firm has already got backers like Chinese giants Alibaba Group Holdings and Japan’s SoftBank.
One of the two people who is familiar with the negotiations said, “Berkshire is in talks to pick up a 3-4% stake in the company and it is being done through a primary subscription of shares.”
The transaction talks took place weeks ago in a board meeting of Vijay Shekhar Sharma. The deal is yet to be finalised along with the size of investment.
The second source said, “Berkshire Hathaway is impressed by the scale that Paytm has been able to build in a short period of time. They realise that technology companies go through a cycle of losses before they start generating cash.”
Berkshire’s key fund manager, Todd Combs is the potential chief investment officer at the firm and is heading the transaction. If the deal goes through, this will be first of Buffets direct investments in India, who until a few years ago stayed away from even the listed technology companies. Buffets decision to invest in a privately held company that still incurs losses, stresses on the potential Buffet sees in the India’s technology market.
When inquired about the developments in the transactions by email to Berkshire Hathaway, CFO Marc Hamburg and to Paytm, there were no responses. Last month, Paytm had said that the company undertakes 5 billion transactions worth $50 billion in gross transaction value (GTV) annually. According to Registrar of Companies (RoC) filings, the company had seen increase in total income by 38% to Rs Rs 828 crore with losses of Rs 899.6 crore in the year ended March 2017.
The Noida based company was valued at around $7 billion last year after it raised $1 billion from Softbank Vision Fund. The company was valued around $10 billion during a secondary share sell by employees, earlier this year.
If this deal is completed, Paytm will have consolidated its position as a leader in the market against rivals like Flipkart-owned Phonepe, Google’s Tez, Facebook owned Whatsapp and Reliance Jio.
Information Source: economictimes
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